Value of Cleveland Cavaliers Skyrockets Overnight
The sports world, for the second time in four years, was put on hold over the past 11 days as Lebron James decided where he would next "take his talents".
Lebron James, along with Chris Bosh and Dwyane Wade, chose to opt out of their deals with the Miami Heat following their crushing loss at the hands of the San Antonio Spurs in the NBA Finals.
The initial consensus was that the "Big Three" had absolutely no intention of leaving Miami and that they would accept lesser deals in order to attract some additional talent to the team.
The initial crack in the foundation of the "Big Three" came when Lebron James opted out and reportedly demanded that he receive a "max deal" (the maximum amount of salary allowed to be paid to him under the current NBA collective bargaining agreement) with his next contract. This obviously meant that the "Big Three" would NOT be collectively taking smaller salaries in order to better the team, and it also showed that the three men were not acting in unison.
A few days after that, Lebron's agent reportedly met with representatives of the Cleveland Cavaliers. After famously leaving the team in 2010 (Lebron James became the most reviled athlete in sports overnight after the "Decision"), could it be possible that he was actually entertaining a return to the team? After Dan Gilbert's poisonous public letter? After the jersey burnings and constant booing?
As the days passed, the list of teams that Lebron was reportedly considering narrowed to just Miami and Cleveland. According to reports, Lebron's agent and family wanted him to return to Cleveland, while representatives from the Miami Heat were obviously pressing hard for a return to Miami.
The saga (and silence) continued until earlier this morning when James announced his return to Cleveland via a Sports Illustrated article. The impossible happened as Lebron, who was once Public Enemy #1 in Cleveland, return to the Cavaliers and the state in which he grew up.
So what are the business implications of this move?
Let's look at the different entities that will either benefit or suffer from this move:
1) Cleveland Cavaliers. It's a no-brainer to say that the value of the Cavaliers franchise has skyrocketed overnight. After all, they went from lottery team to the current favourites to win the NBA Championship in just one evening. Increased ticket sales (expect every game to be sold out), increased jersey sales (the sales of Lebron James jerseys in Cleveland will be off the charts) and increased local TV deal value will drastically increase the value of the franchise. Prior to July 11th, the Cavaliers were worth an estimated $515 million. This number jumped by at least $100 million with the signing of Lebron James.
2) Miami Heat. The value of the Miami Heat soared from $364 million to over $600 million during Lebron's four years with the club - four years that included four trips to the finals and two NBA Championships. With Lebron now leaving the team, the value of the Heat will likely drop by $100 million. Expect to see half-full arenas in Miami this season, and expect the club to have to significantly reduce the asking price of their local TV deal.
3) The NBA. The NBA loves any Lebron James drama, and the league will benefit tremendously from this uptick in excitement. Lebron is always a must-see attraction when he comes to town, but his re-uniting with the Cavaliers will enhance that even more. In addition, the increased buzz will translate into increased TV ratings, which will eventually translate into more dollars for the league's coffers.
4) The cities of Cleveland and Miami. Sports franchises, especially successful ones, draw millions of dollars in revenues into their home cities. People go out to the games and eat at local restaurants, drink at local bars and stay at local hotels. The city of Cleveland will clearly realized a financial benefit from Lebron returning to the city, while Miami will obviously suffer.
5) Lebron's sponsors. Nike, Powerade and others will all realize the benefits of Lebron's decision to return to Cleveland. In just one evening, Lebron James significantly enhanced his image across the world and is no longer Public Enemy #1. Increased shoe sales, jersey sales, etc will have a positive impact on a number of different companies.
Many people are tired of hearing about the Lebron James saga, but it is definitely notable in terms of its financial impact on a number of different multi-million and billion dollar businesses, which is why it's being mentioned on this blog.
Filed under: General Knowledge